More The Morning Headlamp - Lawmakers look to address Budget and AKLNG

The Alliance's Alaska Headlamp

Published: January 18, 2016

Fifteen Alaska lawmakers — 25 percent of the Legislature — responded to Juneau Empire questions about the upcoming legislative session. Headlamp would like to highlight specific answers below. On the state budget, Sen. Cathy Giessel stressed that, "First step — stop looking for magic bullets. We can't tax people and business or cut services enough to bridge the gap. We have to remind ourselves how it happened that we became a state — we pointed out to Congress that we were rich with resources that would be carefully managed to support ourselves." Moreover, Sen. Giessel's main priority for the session is AKLNG. Rep. Shelley Hughes echoed this opinion stating she wants to make, "sure opportunities for Alaskans continue, whether that's ensuring the state has the expertise it needs for its share of the AKLNG project or looking ahead to infrastructure needs and new economic sectors, whether that's working to restore the appropriate balance between the federal government and state government so Alaska can realize more of her potential, or whether that's addressing issues for Alaskan families to promote safe and prosperous communities." Finally, Sen. Donny Olson also indicated that after spending a special session focusing just on AKLNG he absolutely wants to continue advancing the project. Headlamp is glad to hear that so many lawmakers are committed to the AKLNG project this session. Alongside the budget, the megaproject represents one of the biggest obstacles facing the state.

According to coverage in the Alaska Dispatch News, if oil prices remain about where they are now for the next year and a half, tobacco consumers would cough up about five times as many dollars as the production tax. Alcohol drinkers and those who buy motor fuel would be paying more than the oil tax would generate. If prices rise by $5 or so and average $35 for this fiscal year and next, the state is looking at $12 million next fiscal year in oil production taxes. It's just a coincidence, but the tax team is guessing that marijuana taxes will total $12 million in the fiscal year that starts in July. No one knows what marijuana enthusiasts will contribute to state services, but then again, no one knows what will happen with oil. The calculation that shows oil production taxes could drop to $12 million in fiscal year 2017 with $35 oil is more than a guess. The state oil tax law, which was not designed or modeled with $40 oil in mind, includes a 4 percent gross tax that is supposed to be the minimum floor, payable at any price. But there is a hole in the floor that appears to be getting bigger. Gov. Bill Walker has proposed raising the gross tax to 5 percent and there is talk of fixing the hole in the floor. Look for some legislators to push for a bigger increase in the minimum tax, based on the theory that the state has failed to protect its interests at the low end. Headlamp has strongly opposed increasing taxes on Alaskan households ahead of such an uncertain fiscal future. Keeping industry investment and spending up should be what Alaska lawmakers focus on when they return to Juneau tomorrow.

New kids on the block. The new group of young activists, calling themselves Our Alaska, says putting off action to fix the budget is unacceptable. It's trying to rally people to a more organized response that could push legislators into action to do three things at once: cut spending, boost revenue, and rely on the state's savings. "We know that action is not going to happen from within the halls of power," said Erin Harrington, 38, one of Our Alaska's co-founders. "We can either sit around and let the existing, comfortable leadership -- who's basically all riding on their retirement checks -- figure out the future. Or we can be actively involved in it." "We're going to be here in 50 years," said Penny Gage, 29, another co-founder of the group. "A lot of the decision makers in the Legislature and otherwise are not."

Headlamp is encouraged to see Alaska's next generation stepping up and getting involved. Since that first barrel of oil flowed through the Trans Alaska Pipeline System in 1977, Alaska has enjoyed tremendous growth and prosperity. Headlamp believes that the next 30 years of Alaska's history can be even more prosperous if a long term sustainable fiscal plan is put together. To secure a happy, prosperous, and thriving future for Alaska's next generation it is imperative that lawmakers act wisely and boldly this year.

We need real leadership, and we need it now. Highlighted in a recent Fairbanks Daily News Miner editorial, as Legislators report to Juneau for the start of the 2016 session this week, it's not hard to guess what will be the dominant issue in the capitol building this year. Like last year, the state budget crisis will leave precious little room in the short 90-day session for consideration of other items. Like last year, the state will start in a roughly $4 billion budget hole, as a further slump in oil prices — and thus state revenues — has wiped out the $800 million in cuts Gov. Bill Walker and the Legislature made last year. Since 2005 Alaska's general fund spending has increased from roughly $3 billion to nearly $6 billion in FY 2016. According to the Kaiser Family Foundation, in 2013 Alaska spent more money per citizen than any other state in the nation. Headlamp recognizes that given the magnitude of Alaska's deficit, lawmakers cannot cut our way out of this problem. However, Headlamp also recognizes that taxing our way out of this hole is not a feasible solution. The first step in pulling Alaska out of this fiscal mess is to right size government. A holistic plan to fix Alaska's fiscal crisis must include downsizing government, while managing our financial resources, which includes the Permanent Fund earnings reserve, wisely. Crafting policies that help diversify Alaska's economy, in ways that create new jobs and grow the whole economic pie, should also be a focus of lawmakers. Alaska can weather this storm if Alaskans get engaged, and policy makers are willing to make some hard choices.

As we move forward into this difficult legislative session, it is important the public and readers of Headlamp closely monitor what the media reports as fact. We must remain vigilant and ensure that the press is accurately reporting the issues, and not misrepresenting or misquoting what policy makers are saying. If you know something isn't being accurately reported Headlamp wants to know.

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